Wednesday, February 19, 2014


BLOG 144


Well, George Osborne and David Gauke apparently think so!  Because this is the statutory procedure that they propose in the draft legislation included with the consultation document, “Tackling marketed tax avoidance”.  Of course it doesn’t come out and say, “You must lie”.  But that is the effect.

The proposal is that if HMRC open an enquiry on a tax return that includes a claim for relief arising from the use of a tax avoidance scheme, HMRC should be able to require the tax to be paid on account if someone else has lost a tax appeal and HMRC think that their case is “relevant” to yours.  This means that HMRC think that if that decision was applied to what you have done, you would lose your case.

The procedure is they issue you with a notice telling you what the Court or Tribunal decision was and explaining why they think the decision will mean that your case will fail.  They do not need to wait until the decision is published, so you may well not know on what basis that other taxpayer’s claim failed or even whether the arguments you want to raise in your case were considered by the Court.  But that is simply unfair and unreasonable.  It does not force you to lie.

What does is the next bit.  You must either confirm to HMRC that you accept that the ruling in the other case is relevant to yours or must make representations to HMRC as to why you disagree that it is relevant to yours.  Obviously you will make representations if you disagree.  HMRC must then consider your representations and, if they do not agree with your view, notify you that they still consider that the decision is relevant to your case.

On receipt of that notice you must then give a notice to HMRC stating that you accept that the decision in the other case is relevant to yours.

But, by definition, you don’t accept that, or you wouldn’t have made representations to HMRC.  You must therefore either lie and write to HMRC saying that you agree to a situation with which you in fact disagree, or break the law because the law requires you to make such a declaration irrespective of whether it is true or not.

If you decide that your integrity is sufficiently important that you are prepared to break what is clearly an unjust law – because requiring a taxpayer to lie is obviously contrary to justice – you become liable to a penalty of X% of the tax that in HMRC’s view you will owe if you lose your case.  You will have to pay it even if ultimately you are right; you take your case to appeal and win.  The government has not yet indicated what percentage the X% will be.

This is going to be a strong test of a taxpayer’s integrity.  If the amount of the penalty is, say, 1% of £100,000, most people would not lie to save £1,000.  However if it is 20% of £100,000, would you lie to save £20,000?

Did you vote to elect a government that would force you into such a moral dilemma?  If so, would you do so again in the knowledge that Mr Osborne believes it proper to put taxpayers into such an unenviable positon?



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